Multi-focus image fusion is a very essential method of obtaining an all focus image from multiple source images. The fused image eliminates the out of focus regions, and the resultant image contains sharp and focused regions. A novel multiscale image fusion system based on contrast enhancement, spatial gradient information and multiscale image matting is proposed to extract the focused region information from multiple source images. In the proposed image fusion approach, the multi-focus source images are firstly refined over an image enhancement algorithm so that the intensity distribution is enhanced for superior visualization. The edge detection method based on a spatial gradient is employed for obtaining the edge information from the contrast stretched images. This improved edge information is further utilized by a multiscale window technique to produce local and global activity maps. Furthermore, a trimap and decision maps are obtained based upon the information provided by these near and far focus activity maps. Finally, the fused image is achieved by using an enhanced decision maps and fusion rule. The proposed multiscale image matting (MSIM) makes full use of the spatial consistency and the correlation among source images and, therefore, obtains superior performance at object boundaries compared to region-based methods. The achievement of the proposed method is compared with some of the latest techniques by performing qualitative and quantitative evaluation.